Correlation Between Wilmington Large-cap and Invesco Disciplined

Can any of the company-specific risk be diversified away by investing in both Wilmington Large-cap and Invesco Disciplined at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Wilmington Large-cap and Invesco Disciplined into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wilmington Large Cap Strategy and Invesco Disciplined Equity, you can compare the effects of market volatilities on Wilmington Large-cap and Invesco Disciplined and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Wilmington Large-cap with a short position of Invesco Disciplined. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilmington Large-cap and Invesco Disciplined.

Diversification Opportunities for Wilmington Large-cap and Invesco Disciplined

0.62

Correlation Coefficient

Wilmington Large-cap  Invesco Disciplined

Poor diversification

The 3 months correlation between Wilmington and Invesco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Large Cap Strategy and Invesco Disciplined Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Disciplined and Wilmington Large-cap is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Wilmington Large Cap Strategy are associated (or correlated) with Invesco Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Disciplined has no effect on the direction of Wilmington Large-cap i.e., Wilmington Large-cap and Invesco Disciplined go up and down completely randomly.

Pair Corralation between Wilmington Large-cap and Invesco Disciplined

Assuming the 90 days horizon Wilmington Large Cap Strategy is expected to under-perform the Invesco Disciplined. In addition to that, Wilmington Large-cap is 1.09 times more volatile than Invesco Disciplined Equity. It trades about -0.12 of its total potential returns per unit of risk. Invesco Disciplined Equity is currently generating about -0.12 per unit of volatility. If you would invest  3,385  in Invesco Disciplined Equity on November 29, 2024 and sell it today you would lose (237.00) from holding Invesco Disciplined Equity or give up 7.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Wilmington Large Cap Strategy  vs.  Invesco Disciplined Equity

Wilmington Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wilmington Large Cap Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Invesco Disciplined

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Disciplined Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Wilmington Large-cap and Invesco Disciplined

The main advantage of trading using opposite Wilmington Large-cap and Invesco Disciplined positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilmington Large-cap position performs unexpectedly, Invesco Disciplined can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Invesco Disciplined will offset losses from the drop in Invesco Disciplined's long position.

The idea behind Wilmington Large Cap Strategy and Invesco Disciplined Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.